Everbright Securities fined for insider trading

Editor's note: Everbright Securities will be fined 523 million yuan. Four former executives will be banned from entering the securities business for life.

Everbright Securities fined for insider trading

China's securities watchdog confirmed on Friday that abnormal trading on Aug 16 by Everbright Securities constitutes a number of legal and regulatory violations and has slapped fines totaling 523 million yuan ($84.75 million) on the company. [Full Story]

A "fat finger" trading incident involving more than 7.2 billion yuan ($1.17 billion) at Everbright Securities Co Ltd on Aug 16, 2013 exposed regulatory flaws and weak links in the workings of the nation's capital markets. Regulators are still investigating the trading error. [Photo / China Daily]

Bourse defends handling of Everbright glitch

The Shanghai Stock Exchange, the largest bourse in China by market capitalization, has defended its handling of a recent incident in which transaction sums were incorrectly inputted for Everbright Securities, misleading investors.

Aug 16 11:05 am The Shanghai Composite Index spiked by around 100 points within two minutes, with turnover totaling 7.8 billion yuan ($1.27 billion). 11:32 am An exclusive source from 21st Century Business Herald said that the surge was caused by a move by Everbright Securities Co Ltd to invest 7.2 billion yuan into the buying. 11:43 am A notice was released by the Shanghai Stock Exchange, saying the market was operating normally. 2:50 pm Everbright Securities admitted there was a problem in the arbitrage system, which was under examination and investigation by the company. 4:27 pm The China Securities Regulatory Commission said that further investigation on the incident caused by Everbright will be carried out immediately. 5:02 pm Everbright Futures Co increased its short positions in the benchmark September stock-index futures contract by 7,023 lots worth about 4.82 billion yuan after the closing of the market. Aug 18 3:42 pm The regulatory commission said there was no discovery of manual operation mistakes at Everbright Securities but the risk-control system of the company has certain loopholes. Further investigation is undertaken by the Shanghai bureau of the securities regulatory commission. 4:35 pm Everbright issued a notice to admit an incident and the negative effects it has had on the company. 6:00 pm A news conference was held by Everbright Securities to explain the incident to the media.

The exchange said on Sunday that its handling of the incident on Aug 16 was in accordance with regulations and precedents.[Full Story]

Video: SSE holds online press meeting on Everbright case

Everbright trading probe nearly done, CSRC says

Collection and examination of evidence into the trading glitch at China Everbright Securities Co Ltd is almost done, but further verification is needed before the results are made public, the China Securities Regulatory Commission said on Friday.

"The evidence has been handed over to the relevant departments. Because this kind of case is new to China, we organized a group of experts for consultation. The results will be announced as soon as we finish the procedure," a CSRC spokesman said.

On Sunday, the CSRC affirmed that design flaws in Everbright's trading system had triggered huge buy orders from the proprietary trading department of the brokerage, which lifted the Shanghai Composite Index more than 5 percent within three minutes on Aug 16.

At a news conference on Friday, the CSRC reiterated that no fund manager from the securities company had committed illegal actions during the transaction. [Full Story]

Tougher punishment for stock market offence

China's securities regulator on Saturday pledged to intensify punishment for severe stock market violations amid rising such offences.

Jiang Yang, vice chairman of China Securities Regulatory Commission (CSRC), told a listed-companies summit that in the first six months, 26 cases had been submitted to investigations, representing a hefty increase from the same period a year ago.[Full Story]

Video: Securities regulator to crackdown on violations

CSRC head vows stronger effort on enforcement

Following up on strong words about enforcement, the head of the China Securities Regulatory Commission, Xiao Gang, said his agency would double its investigative team with 600 new staff.

The plan, disclosed by Xiao on the agency's website on Tuesday, is widely seen as a signal that the CSRC is taking serious steps to address deficiencies in the capital markets.

His call came amid the fallout of the Everbright Securities Co Ltd trading error last week, which exposed irregularities and structural flaws in the industry.[Full Story]

Glitch rings regulator's alarm bell

Why was there no warning?

The debacle "has exposed the lack of a comprehensive warning mechanism in the stock exchanges," said Yin Zhongli, deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences. [Full Story]

How to protect individual investors?

"Clearly small investors buying blue chips without knowing the entire insider information became the biggest victims, while mature institutions and investors profiteer by taking advantage of the situation," she added.[Full Story]

What Everbright Securities was told to do?

Everbright Securities said Shanghai securities authorities had told them to suspend trading of proprietary stocks in the spot market for three months until Nov 18.

The China Financial Futures Exchange on Sunday imposed restrictions on Everbright Securities, limiting its ability to establish fresh stock index futures.[Full Story]

Error sinks brokerage equities

The mainland's stock market rose moderately on Monday, with brokerages falling after a trading error at Everbright Securities Co Ltd last Friday caused market gyrations.

Analyst said the incident at Everbright exposed loopholes in brokerages' internal risk-control systems, and that may lead to closer regulatory scrutiny. It could also affect brokerages' proprietary trading business, they said.[Full Story]

Rumors swirl on trading rout

A rumor has spread that a Taiwan team working for Everbright Securities Co Ltd was responsible for the trading error that triggered a surge in the mainland's stock market on Friday by placing a wrong order in the system, the 21st Century Business Herald reported.

There was also speculation that the error was caused by a typing error by a trader, who placed an order for 3 billion shares - not the intended 30 million.

Brokerage industry sources even speculated that there was a "certain cash flow from overseas" that got involved in the transaction as well.[Full Story]

Error puts Shanghai bourse in a spin

Shares in Shanghai had a roller coaster ride on Friday after the country's fifth-largest brokerage by market value reported a trading error.

Shares surged in the morning, probably triggered by the brokerage trading system fault and led by financial and oil giants, before easing back in the afternoon.

Traders and analysts called for an immediate investigation into possible price manipulation, while short-sellers were furious and urged the authorities to probe the case and come up with a compensation plan.[Full Story]

CSRC blames Everbright Securities for spike

A securities commission spokesman said Friday that an abnormal stock market spike seen during Friday's morning trading was mainly caused by a large number of purchase orders sent from Everbright Securities' own account.

The China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange (SSE) are still investigating the case, a CSRC spokesman said at a press conference.

Everbright Securities Co Ltd said in a statement to the SSE that its investment strategy department encountered a problem in its arbitrage system while operating with its own funds during morning trading.[Full Story]